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Peer-to-Peer Partnerships: A Must for Business Growth

08Mar 2011

Peer-to-Peer Partnerships: A Must for Business Growth

Lately, much has been said about the need for partnerships in order to facilitate growth, but the truth is that peer-to-peer partnering is easier said than done. VSR talked to Larry Walsh, president of the 2112 Group and respected blogger, to learn more about the challenges and opportunities inherent in partnering with peers.

VSR: Why are we hearing so much about solution providers partnering right now?

WALSH: For solution partners, when it comes to peer-to-peer relationships, you’re really talking about augmenting, combining or offsetting your strengths and weaknesses. Vendors want to see peer-to-peer partnering to expose them to a greater number of accounts, drive attach rates, and retain sales within ecosystems.

VSR: Is peer-to-peer partnering essential to take a solution provider to the next level in their business?

WALSH: A lot of peer partnerships are based on fulfillment, not on business building. Very few solution providers are building business plans based on partner-built revenue. It’s peer-level partnering, but is it growing the business? Not really. There is no plan behind it, no investment, no partner identification, no account building. Peer-level partnerships often happen on an ad-hoc, opportunistic basis, not a sustained effort for both businesses to leverage each other and grow share.

A relatively small number of solution providers engage in peer-to-peer relationships on a consistent basis. If it does happen one party tends to be dominant. You do see robust interactions between solution providers and MSPs—those that become Master MSPs—because they’ve made the investment of money and time to develop services and infrastructure directed toward a specific segment and that fulfills a specific need. For example, HEIT in Colorado used to be a reseller. They do security services for financial institutions. Now they work with downstream partners to extend their reach and manage relationships. If you develop a product or service that can be marketed across a broad geographic region, you become your own vendor and can start your own channel program.

VSR: One often-cited goal for partnering is to jointly develop complete solutions. Does this work?

WALSH: Part of the problem is, you start getting into price stacking. Say you are POS, I’m peripherals and the third guy is networking. To make a deal viable it’s got to be profitable for all but less than the sum of its parts. We each want $1 but now it’s $3 and the customer is expecting $1.75. You start to price yourself out of the market.

VSR: So when are peer-to-peer solution provider relationships important?

WALSH: There are cases where it works well. It’s the difference between opportunistic and persistent relationships. Persistent relationships have a plan. With opportunistic relationships there is a need to fulfill. You have a trusted network, everyone understands their role, and you’re essentially buying capacity. It’s not a partnership. In reality you’re subcontractors.

Say you’re in New Jersey, I’m in New York, and we have customers around us. But then a customer opens an office in Billings, Montana. I doubt we’d open an office in Billings. But if I know someone in Billings that’s versed in what we do, I can call them up, and now we have a happy customer, and a deal, and we can share business. It’s quite common, but I’d hardly call that partnering. There are also service networks that specialize in these relationships, such as OnForce, and some distributors and vendors do that.

VSR: So how can solution providers partner for complete solutions?

WALSH: We do see solution providers building partnerships with vendors. There’s a lot less risk involved. For example, solution provider Smartronix won a contract to migrate four Treasury Department websites to the Amazon Elastic Compute Cloud and Microsoft’s deploy SharePoint collaboration on the hosted platform. Smartronix designed the solution and managed the account with Treasury, and brought in Amazon, Microsoft and Akamai. The partner owned the deal, and all components and technology support came from vendors. That’s a good example to learn from.

VSR: So, whether it’s with a vendor or a peer, what questions should solution providers be asking as they consider entering into partnerships?

WALSH: Hope is not a plan. If you are going to do peering, it can be as much a distraction as an enabler. It’s not easy. I hear from solution providers that, when you get into a teaming relationship, it requires management oversight, a legal construct needs to be in place, there’s got to be an agreement on financials, and everyone knows what they’re supposed to do and what they’re getting paid for. It’s difficult to team in such a way that everyone wins consistently.

If you do want to pursue peer relationships, build a plan first for what you want to get out of it. Do you want to expand your market reach? Extend your technical capabilities? Find a back door into a new vendor? You have to have a real understanding of where you want your business to go, your goals, and what you’re looking for to attain your goals. Then look at what a peer partnership should look like. You have to go in with your eyes wide open and with the intent not to be opportunistic.

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